Indian polyester industry braces for shift as Chinese exports dip.

The Indian polyester industry is poised for a period of adjustment as China's polyester product exports experience a significant decline in the first two months of 2024. According to Chinese Customs data, polyester filament yarn and staple fiber exports, which were major contributors to China's growth in 2023, fell by 63,000 tons and 26,000 tons year-on-year, respectively. Polyester product exports in January-February 2024 fell by 18,000 tons compared to the same period last year. This could create new opportunities for Indian producers in both domestic and export markets.

Table: China's Polyester Exports (Jan-Feb 2024 vs. Jan-Feb 2023) in thousand tons (KT)

Domestic demand, a silver lining

While China's declining exports raise concerns, there are positive signs for the Indian polyester industry. Domestic demand for polyester yarn and woven fabrics, particularly filament woven fabrics, has shown year-on-year growth in the first two months of 2024. This growth can be attributed to confirmed overseas orders placed at the beginning of the year and the ongoing spring clothing sales season in India. The data suggests a potential shift in demand within the Chinese market itself. Despite the decline in filament yarn and staple fiber exports, China's downstream polyester yarn and woven fabrics exports witnessed year-on-year growth, particularly in filament woven fabrics. This indicates a potential increase in domestic consumption within China.

Indian industry well-positioned to capitalize

This shift in Chinese demand presents a significant opportunity for the Indian polyester industry. With a robust domestic market and growing production capacity, Indian polyester manufacturers are well-positioned to fill the gap left by the decline in Chinese exports. Indian companies can potentially capture a larger share of the domestic market for polyester yarn and fabrics, currently experiencing growth.

Indian polyester businesses should focus on strengthening their presence in the domestic market while also exploring export opportunities in other regions. Indian producers could fill the gap created by China's reduced presence in the global export market, particularly for filament yarn and staple fiber. Government initiatives promoting ‘Make in India’ and Free Trade Agreements (FTAs) can further enhance the competitiveness of Indian polyester in the global market.

Indeed, the short-term data (January-February 2024) might not be entirely representative due to seasonal factors like the Lunar New Year. However, the long-term trend of China potentially scaling back on certain polyester product exports presents a strategic opportunity for the Indian polyester industry. By focusing on domestic demand and exploring export opportunities, Indian producers can potentially gain a significant advantage in the global market.